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Alphabet Beats Q3 Market Expectations With $27.8 Billion Revenue, $6.7 Billion Net Income

Google’s corporate parent Alphabet had another blockbuster quarter: The company handily surpassed analyst expectations on both revenue and earnings for the quarter ending Sept. 30.

Alphabet generated a total of $27.77 billion in revenue in Q3 of 2017, compared to $22.45 billion during the same quarter last year. Net income for the quarter was $6.73 billion on an adjusted basis, compared to $5 billion a year ago.

This equals earnings of $9.57 per share, compared to $7.25 for last year’s Q3. Analysts had expected revenue to come in at $21.9 billion, with earnings of $8.34 per share.

We had a terrific quarter, said Alphabet CFO Ruth Porat. She added that the company had a strong performance across all regions, and also called out “substantial growth in cloud, play, and hardware.”

As expected, Alphabet still made most of its money with Google’s core advertising business, which brought in more than $24 billion. However, the company also saw its revenue from cloud, digital media, and hardware sales grow significantly, from $2.4 billion during Q3 of 2016 to $3.4 billion during this past quarter.

The company also grew its other bets revenue, which includes money coming from Alphabet’s Nest and Fiber businesses, to $8.74 billion. Other bets spending, which also includes the company’s self-driving car efforts, declined, but still landed the entire segment in the red, to the tune of $812 million in losses.

Porat cautioned investors that Google’s costs would grow in the coming quarter as the company would spend more on advertising its hardware products. Google recently introduced the second generation of its Pixel phones, and expanded its lineup of smart speakers with the Google Home Mini and Google Home Max.

The company’s renewed focus on hardware resulted in some questions from analysts, with one asking why Google was doing hardware at all. You are clearly entering an era where you will have different types of computing experiences,” answered Google CEO Sundar Pichai.

As consumers don’t just use phones, but also speakers, TVs, and other devices, Google had to be able to be part of the entire ecosystem. He added that this was also one of the reasons why Google recently acquired key talent from HTC. “As we get into other product categories, it’s important to continue to build that out,” he said, hinting at the possibility to also build speakers and VR products in-house.

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